Sunday, 24 August 2014

MoD reconsidering blacklisting policy

By Ajai
Shukla

Visakhapatnam

Business Standard, 24th Aug 14

In February
2013, Italian prosecutors arrested Giuseppe Orsi, the chief executive of
Italian defence multinational, Finmeccanica on suspicion of paying bribes to
facilitate the sale of VIP helicopters to India. Since then, the ministry of
defence (MoD) has been in a quandary about whether to blacklist Finmeccanica
and all its subsidiaries, or only AgustaWestland, the subsidiary that built and
sold the AW-101 helicopters to India.

Blacklisting
all Finmeccanica group companies --- which include marine specialist, WASS;
radar and communications specialist Selex Electronics Systems; aerospace giant,
Alenia Aeromacchi; and armaments major, Otomelara --- would undermine several
Indian tenders, in which they are important players.

Now, the
MoD will decide on this issue. On Saturday, Defence Minister Arun Jaitley said
the ministry would see how wrongdoers could be punished without blocking
acquisitions and the flow of spares.

“It is a
very serious challenge. We have to balance between two competing public
interests. One public interest is that contracts are meant to be abided with
and not violated, even by our suppliers. The other competing interest is the
larger public interest in terms of our national security and defence
preparedness. It is an issue that we are fully seized of and we are in the
process of finding an answer to this and you will hear about this from us very
soon”, said Jaitley.

Clearly
referring to the AW-101 VIP helicopters, of which India had already taken
delivery of three before terminating the contract with AgustaWestland for
twelve helicopters, Jaitley said the decision “relates to cases where (a)
violations have taken place and (b) the consequences of those violations affect
our defence preparedness… particularly where parts and spares are to be made
available.”

The MoD has
been alarmed by the potential consequences of blacklisting all Finmeccanica
subsidiaries. WASS has been selected in a $300 million tender to supply 98 Black
Shark torpedoes for the Scorpene submarines. A reconsideration of this would
delay the operationalization of the Scorpene, which is already running several
years late. When the submarines start joining the navy’s fleet in 2016, it will
be armed only with the Exocet anti-ship missile. There will be no weapon to
take on Pakistan’s silent new Khalid-class submarines, the French Agosta-90B. WASS
is also a contender for a new decoy system for torpedoes.

Similarly,
Finmeccanica company, Otomelara, is the licensee for 76 millimetre guns, built
by BHEL, which equip all Indian warships. Otomelara is also a leading bidder in
the navy contract for heavier 127 millimetre guns, that are considered more
suitable than the lighter, older guns. It is also being considered for
supplying 12.7 mm stabilised guns.

Another
subsidiary, Selex Electronics Systems (Selex ES) is fitting radar systems on
the INS Vikrant, the navy’s indigenous aircraft carrier being built by Cochin
Shipyard. Cancelling this would cause major delay in a project that is already
three years behind schedule. Selex ES is also bidding to upgrade the navy’s
Kamov-28 anti-submarine helicopter. It has completed trials for supplying an
advanced pilotless target aircraft (APTA), for training air defence gunners.

Meanwhile Alenia
Aeromacchi, another subsidiary, is a much-desired partner in the project for
the Indian private sector to build 56 transport aircraft to replace the
obsolescent Indian Air Force (IAF) Avro. Alenia’s C-27J transport aircraft, a
proven design, is considered closest to what the IAF desires.

Finally,
AgustaWestland itself is a leading contender for supplying the navy with a
multi role helicopter in the 12-tonne class, to fly from warships and perform
the job that the Sea King 42B has been doing with distinction for decades.
Besides, with three AW-101 VIP helicopters already delivered, terminating the
contract would create uncertainty about spares and support.

Since the
blacklisting of AgustaWestland, the United Progressive Alliance (UPA)
government failed to take a decision on Finmeccanica. Since it came to power,
the BJP-led National Democratic Alliance (NDA) government has sent out mixed
messages.

In June,
Minister of State for Defence Rao Inderjit Singh had indicated that he would
not favour trigger-happy blacklisting that might hamstring Indian defence
procurement by preventing many companies from responding to Indian tenders.
Yet, earlier this month, the MoD sent out a circular directing that, while
tenders involving Finmecannica companies could continue being evaluated, no
Finmeccanica company would be actually awarded a contract.

Contacted
for comments, MoD spokesperson Sitanshu Kar stated that Finmecannica had not
been officially blacklisted.

So many companies have been blacklisted for giving bribes but how many babus and politicians have been prosecuted correspondingly for taking those bribes? This whole blacklisting drama has been an eyewash to give impression of GOI acting against the corrupt without really acting against the corrupt in the government.